HC Deb 11 June 1947 vol 438 cc1147-61
Mr. Pitman

I beg to move, in page 24, line 1, at the beginning, to insert: (1) Where any shares of a company are held by employees of that company under a co-partnership scheme, profits tax shall not be payable on that proportion of the company's profits which the co-partnership issued capital bears to the total issued capital. This subject of the treatment and distribution of co-partnership shares is one which I have raised consistently throughout, first on the Budget Resolutions, and then on the Second Reading of the Finance Bill. When the Chancellor was speaking on the question I did not think he was particularly clear in appreciating the point or in giving an answer. For the benefit of the Committee perhaps I ought to say that co-partnership schemes very often take the form of a distribution of shares to the staff. The staff are then in the position, particularly if the distribution is in equity shares, as it very often is, that they are paying the Profits Tax not only on their own shares but on all the shares, including the prior shares which stand ahead of them in the company's structure.

There is the particular case of the John Lewis partnership. That company has taken into partnership the whole of its staff. All the equity shares of the company are owned by the staff under the co-partnership scheme. There is considerable finance in that company which is raised by prior charges. The interest on those preference shares ranks ahead of the co-partners' shares, but the Profits Tax on them will be a charge against the company, and so a charge against the co-partnership holders. The Chancellor of the Exchequer made the point just now that many companies had paid a large amount of E.P.T. and were grateful for the remission of that tax. He must not overlook the fact that there are many companies by whom E.P.T. was not paid, and for whom, therefore, the quid pro quo is non-existent. I do not know the precise situation in regard to the Lewis partnership, but I do know that a great part of their property was blitzed. I know that the retail trade of London had an extremely bad time during the "doodlebug" attacks in particular. It may well be that the Lewis staff, taking them as an illustration, have not had any of this quid pro quo of a remission of E.P.T.

I would strongly urge upon the Chancellor that he should give a concession in this case. We feel that it is wrong to tax the equity shareholder, but we lost upon that Amendment. Here, we single out one particular type cf. equity shareholder whose case ought, we think, to win sympathy on both sides of the Committee. Members of a staff who have been taken into co-partnership with the entrepreneur to run the risk and take the cushions of losses and profits, should not be subjected, not only to a tax on their own shares, but to a tax upon the shares of others. We ask for this special treatment of this special type of shareholder.

7.45 p.m.

Lieut.-Commander Braithwaite

I desire to support the Amendment. It is unfortunate that it has to be considered during the dinner hour. I am sure hon. Members on both sides of the Committee would have been extremely interested in the proposal. Earlier in the day, when we were discussing the main machinery of the Profits Tax, an hon. Member opposite, it will be recalled, made a reference to what he was pleased to call the somnolent rentiers. The Amendment deals with those who are neither somnolent nor rentiers. It seeks to exempt from this form of taxation schemes in which the employees themselves, be they engaged in management or at the bench, be they blackcoated or not, form themselves into an organisation to be active participants in the prosperity or otherwise of their undertaking.

Apart from the merits of the Amendment, I commend it because I believe that the Government intend to strike at this form of co-partnership between management and workers. I happen to be, and I have for 25 years been, an enthusiast in the realm of co-partnership, and I have always believed in the enlightened twentieth century approach along those lines, where possible. I would very much like to see this Amendment accepted because I believe it would be of great value. That is merely a personal opinion. I further desire to see the Amendment accepted on the grounds advanced by my hon. Friend the Member for Bath (Mr. Pitman). It goes outside the scope of what the Government have in mind in these matters when they talk of entrepreneurs and sleeping partners who derive profit without the sweat of their brows. These people are outside that definition. I hope that the Solicitor-General will now leap to his feet as the representative of the Government and express his acceptance of the Amendment.

Mr. Osborne (Louth)

I also support the Amendment. I believe that many people are beginning to lose faith in co-partnership schemes. There are hon. Members on both sides of the House who think that here is the cure for all our industrial troubles, but I do not think that it will work out as expected. In some industries and trades, however, co-partnership schemes still have a very important part to play. Anything which encourages the worker to put his savings into the business is good. The Amendment merely seeks to encourage that movement. I believe that the cure for our industrial troubles is not that which is generally put forward by hon. Members opposite, of putting all assets into the hands of the State. I would like to see every employee and every man in the country made into a small capitalist. The way to cure the ills of capitalism is to make everybody a capitalist, and the way to encourage that is to make them co-partners. Therefore, I wish to support this Amendment. The more workers own shares in the companies for whom they are working, the better will be the results.

The Solicitor-General

I must confess that I feel there are great difficulties about this proposal. As I understood the arguments of the hon. Members who supported this Amendment, it would mean that the proportion of the company's profits attributable to the co-partnership issue capital, that is to say, the equivalent proportion of it, should be excluded from the scope of the Profits Tax. That, I suppose, is how it would work out. But, once one opens the door to one particular claim, it is very difficult to shut it to others. Suppose there is an employee in a business who, under a co-partnership scheme, owns shares in that business, and that next door to him there is an extremely industrious person who has put aside money with which he has bought shares in another business, or perhaps in the same business. It would be very difficult to select the employee, because he is in the partnership, and take the burden off his shoulders, while placing it upon the shoulders of the person who may be equally industrious and meritorious, and who happens to have shares in the same company which he has bought out of his savings. As I understand it, it is sought to justify the proposal on the basis that the co-partnership system is a useful institution.

Mr. Pitman

If the hon. and learned Solicitor-General will allow me to justify that, I would say that the essential difference Between our proposal and the wider expansion which he is making is that, in essence, the co-partnership scheme is something which is administered from the centre, whereas the other—and there is a clear line of distinction—is a purely fortuitous piece of investment by the person concerned. But the ability to draw a line and the reasons for drawing it are absolutely clear.

The Solicitor-General

I agree that there is that distinction, but the difficulty is that once one admits that distinction as a valid reason for excluding this type of investor from the tax, it is difficult to refuse to exclude many other categories of investors.

Mr. Osborne

Such as?

The Solicitor-General

Any other meritorious person who works hard and puts aside money which he invests in a business. It would be difficult to say that he had not as strong a claim. The one is under a scheme, and the other is an outside investor. Once one accepts as a principle that a block of people shall be excluded from the scope of the tax because they are part of a scheme, one cannot shut the door to another whole group of investors who have different claims—no doubt claims put forward on different hypotheses and for different reasons. Therefore, I see great difficulties in accepting this Amendment. However, as always, we will consider what has been said, but I cannot be taken as giving any sort of undertaking. I feel that it would not be reasonable to accept the Amendment because, if one did, it would be opening the door to many other claims which it would be impossible to resist. They may be different in principle and in type, but, nevertheless, they may have just as strong a case for being exempted from the tax. The tax is based on the assumption that the profits of a company, including its investments, are to come under the tax. There is to be an overall tax which will impinge upon the profits of the company as defined in the Bill. For those reasons, I fear that the answer which I must give at the moment is that I shall advise my hon. Friends to vote against this Amendment.

Mr. Frank Byers (Dorset, Northern)

I think that the hon. and learned Solicitor-General has misunderstood the purpose of this Amendment. The hon. Member for Bath (Mr. Pitman) will correct me if I am wrong, but I understood that its purpose was to give some sort of stimulus to the promotion of co-partnership schemes. If that is so, none of the arguments which the hon. and learned Solicitor-General has put forward would apply. It is not a question of justice between one type of investor and another. That is a different argument. It is a question of using differential taxation when promoting a co-partnership scheme The essence of a co-partnership is that the workers participate in the business. That is really the only object of this Amendment. It seeks to do two things; first, not to penalise the workers by the Profits Tax, and, secondly, to make it worth while, from the point of view of the workers, as well as of the managers and directors, to institute co-partnership schemes. I do not think that a single word of what the hon. and learned Solicitor-General has said has been germane to the point at issue. It is all very well to say that this would open the door to other claims. But would it? This Amendment deals with co-partnerships, with the workers in industry. I do not see how it can possibly affect other people. There may be a man in industry who is a member of a co-partnership scheme, and who wants to invest in something else. That is all right. He then comes under an entirely different set of rules. That has nothing whatever to do with this case.

I would seriously suggest to the hon. and learned Solicitor-General that he should look at this again. If he refuses to do so, I am entitled to say that his party do not believe in co-partnership at all. I am not asking the Government to accept this Amendment, but only to look at it again. I got the impression that the hon. and learned Solicitor-General did not think that co-partnership was important, and that he was merely looking at it from the point of view of one investor as against another. I would seriously advise him to give an assurance that he does not propose to close the door to the promotion of co-partnership schemes by differential taxation, and that he will look into the matter between now and the Report stage.

Mr. Gallacher

Is the hon. Gentleman not aware that we are going to push the capitalists out altogether?

Mr. Byers

I think, from the hon. Gentleman's point of view, that is quite a legitimate aim. But I shall fight to prevent him from achieving it, and I think we shall win, because we have an anti-totalitarian tradition in this country. I want to see capitalism working in the interests of the community; I do not want to see Socialism working against the best interests of the community, and creating a privileged class.

Sir A. Gridley

I really think that wonders will never cease. If I may say so with respect, the hon. and learned Solicitor-General's arguments would seem to suggest that he is entirely a non-Socialist, because here is something which is to the interest of the workers in industry. Let me ask him to apply his mind to this. If I am correctly informed, should I and my co-directors decide at the end of the year, when we see what the profits of the business are, that we will distribute a percentage of those profits among the workers—which is, in fact, what we want to do in this particular company—we may distribute those profits among the workers, and those distributed profits will not be taxed under the existing law. If, instead of doing it that way, I say to the workers; "I will give you co-partnership shares, and you will get a dividend," the profits thus distributed will be taxed, unless the Solicitor-General accepts this Amendment. Do the Government or do they not want to see those responsible for distributing the profits of industry give their workers a share of those profits? I ask the Government to answer. If they do, and I am sure they do, wherever it is possible, they ought to treat the distribution of profits among the workers in precisely the same way, whatever the method of distribution. Therefore, to refuse to exclude co-partnership shares from liability to tax would really be absolutely indefensible on the part of the Government.

8.0 p.m.

Mr. John Paton (Norwich)

It is assumed on the other side of the Committee that the principle of co-partnership is something which we as Socialists are bound to accept. We have indeed been challenged by an hon. Member whether we did or did not accept it. There has been nothing in the history of co-partnership in this country, as we have seen it practised, that would induce any Socialist to give wholehearted acceptance to the principle. I say that plainly and bluntly. This party has never been committed to the conception of co- partnership, because, as was said by the hon. Member for West Fife (Mr. Gallacher), a minute or two ago, we believe in Socialism, and not in the division of profits even as between workers and capitalists. This proposal, which I hope the Solicitor-General will resist, should be refused on two grounds. First it is an extremely doubtful proposition whether we should, in fact, use the instrument of taxation for the furtherance of forms of industrial organisation which some of us may think are likely to be more beneficial than others. My own view is quite definite. It is that in all the history of co-partership, as we have seen it in this country, we have a sound case for refusing to support it and extend it.

The second reason why I think the Amendment should be refused is that I cannot understand why it should be assumed that it is equitable to use the machinery of taxation to exempt one form of profit taking from a tax imposed upon others. After all, if the principle of co-partnership, as it has been expounded from the other side of the Committee—that workmen shall be associated in the shareholding of a particular firm, and, therefore, be entitled to the benefits of any profits earned by that firm—is to be accepted, there seem to be no grounds in equity why that group of workmen should be exempted from a tax which falls on others throughout the capitalist system. I hope that the Solicitor-General will refuse to accept this Amendment.

Mr. Peake

The Solicitor-Generally and the speech of the hon. Member for Norwich (Mr. Paton) both illustrate the anomalies and absurdities of the form of Profits Tax which we are now discussing. The Profits Tax is assessed, not on individuals, but on companies. Partnerships are now to be exempt; individuals are also exempt. The tax is assessed on companies. It is not assessed on the debenture holder, the preference shareholder, the ordinary shareholder, or the employee. Surely, as it is the company which is assessed to tax, the only class of shareholders who make any contribution towards payment of the tax are the ordinary shareholder, on the one hand, and the employee shareholder, the shareholder who holds shares under a co-partnership scheme, on the other. It seems ridiculous to say that this Amendment is a claim for a special exemption The holders of the debentures and the preference stock make no contribution of any sort or kind.

I congratulate my hon. Friend on this Amendment; it is a very good one. He suggests that where there is a scheme of co-partnership, and 5 per cent. or 10 per cent., or may be 20 per cent. of the equity stock of the concern is owned by the employees in the concern, to that extent the Profits Tax should be abated and relieved. It seems to me to be an admirable proposition. Debenture holders would be exempt on their interest; preference stockholders will be exempt on theirs, and employee shareholders would share in the exemption. We on this side firmly believe in co-partnership. We think it is a good thing, and we want to see it extended. Therefore, we support the Amendment.

Mr. John Lewis (Bolton)

What is the difference between one class of equity shareholder and another? The employee shareholder might not be a debenture holder or a preference holder. He might be an equity shareholder. Is the right hon. Member for North Leeds (Mr. Peake) suggesting that there should be some difference between one class of equity shareholder and another?

Mr. Peake

Yes, for the reason that they hold their shares under a definite co-partnership scheme, and the amount of dividend they get depends upon the prosperity of the company.

Mr. Lewis

Surely, if I had a holding it would be liable to tax? Why should not the employee be under the same obligation?

Sir H. Lucas-Tooth

Our purpose in moving this Amendment is not essentially sentimental. It is not for the purpose of giving the workers some additional slice as a matter of sentiment. As has been said, our purpose is to encourage co-partnership schemes. Not only do such schemes increase incentive, but they have the further effect, to which I think we should give attention, of carrying some right of control of the company. It is easy to avoid the payment of this tax by making a payment out of profits if that payment is in the nature of a bonus payment to the employees of the company. I think I am right in saying that if the directors find that there is a substantial profit at the end of any year, they can make a payment out of that profit to the employees of the company which will bear the same relation to the success of the company during the year as would dividends under a co-partnership scheme, and that payment will not be subject to tax. That really does not cover the point we want to make, which is that a co-partner-ship scheme gives the employees in the industry a particular interest in the industry in that it gives them some right of control. They are interested in the company from more than one angle. They have some say in how the business in which they are working is to be managed. It is for that reason that we welcome co-partnership schemes and press the Government to make the concession sought in this Amendment.

Mr. Osborne

I wish to make one point on the question why we should distinguish between 'one class of equity holders and another. There is one preponderant problem facing the country, and especially the Government, and it is the problem of production. I do not apologise for referring to that. We have either to produce or starve. If more and more of the managements of works own shares in their concerns, they will take a greater interest in how those concerns are run. Thus we should tend to get—I do not say we should automatically get—higher production. Local bottlenecks will be overcome more quickly if men have their hearts and their pockets in the businesses. Therefore, on the grounds of production this Amendment ought to be accepted. It is a reply to those wonderful advertisements the Government have put up—because Socialism will not work—which say that we have to work or starve. For that reason, and because it will help the Ministry of Labour this Amendment ought to be accepted by the Solicitor-General.

Question put, "That those words be there inserted."

The Committee divided: Ayes, 105; Noes, 264.

Division No. 245.] AYES. [7.32 p.m.
Adams, Richard (Balham) Benson, G. Burke, W. A.
Alexander, Rt. Hon. A V Berry, H. Butler, H. W. (Hackney, S.)
Allen, A. C. (Bosworth) Beswick, F. Byers, Frank
Allighan, Garry Bing, G. H. C Callaghan, James
Alpass, J H. Binns, J. Carmichael, James
Anderson, F. (Whitehaven) Blenkinsop, A. Castle, Mrs. B. A.
Attewell, H. C. Blyton, W. R. Chamberlain, R. A
Ayles, W. H. Bottomley, A. G. Champion, A. J.
Ayrton Gould, Mrs B Bowles, F. G. (Nuneaton) Chafer, D.
Bacon, Miss A. Braddock, Mrs. E. M. (L' [...]) Chetwynd, G. R
Baird J. Braddock, T. (Mitcham) Cocks, F. S
Balfour, A. Brook, D. (Halifax) Coldrick, W.
Barstow, P. G Brooks, T. J. (Rothwell) Collins, V. J.
Barton, C. Brown, George (Belper) Colman, Miss G. M
Battley, J. R Brown, T. J. (Ince) Cooper, Wing-Comdr G
Beattie, J. (Belfast W.) Bruce, Maj. D. W. T. Corlett, Dr. J.
Bechervaise, A. E. Buchanan, G. Corvedale, Viscount
Cove, W. G. Kinley, J. Robertson, J. J. (Berwick)
Daggar, G. Lang, G. Rogers, G. H R
Dalton, Rt. Hon H Lee, F. (Hulme) Ross, William (Kilmarnock)
Davies, Edward (Burslem) Lee, Miss J. (Cannock) Royle, C.
Davies, Ernest (Enfield) Leslie, J R. Sargood, R.
Davies, Harold (Leek) Lever, N. H Scott-Elliot, W
Davies, Hadyn (St. Pancras, S. W.) Levy, B. W. Segal, Dr. S
Davies, R. J. (Westhoughton) Lewis, A. W J. (Upton) Sharp, Granville
Deer, G. Lewis, J. (Bolton) Shawcross, C. N (Widnes)
Delargy, H J Lipton, Lt.-Col. M. Silverman, S. S. (Nelson)
Diamond, J. Logan, D. G. Simmons, C. J.
Driberg, T. E. N. Longden, F. Skeffington-Lodge, T. C
Dugdale, J. (W. Bromwich) Lyne, A. W. Skinnard, F W.
Dumpleton, C. W. McAdam, W. Smith, C (Colchester)
Durbin, E. F. M. McEntee, V. La T Smith, H. N. (Nottingham, S.)
Ede, Rt Hon. J. C. McGhee, H G Snow, Capt. J. W.
Edwards, Rt. Hon. Sir C. (Bedwellty) Mack, J. D. Solley, L. J
Edwards, N (Caerphilly) McKay, J. (Wallsend) Sorensen, R. W.
Edwards, W. J. (Whitechapel) McKinlay, A. S. Soskice, Maj. Sir F.
Evans, S. N. (Wednesbury) Maclean, N. (Govan) Stamford, W.
Ewart, R. McLeavy, F. Steele, T.
Fairhurst, F Manning, C. (Camberwell, N.) Stephen, C.
Fernyhough, E Manning, Mrs. L (Epping) Stewart, Michael (Fulham, E.)
Follick, M. Marshall, F. (Brightside) Stokes, R. R
Foot, M. M. Mayhew, C. P. Strauss, G. R. (Lambeth, N.)
Forman, J. C. Medland, H. M. Stross, Dr. B.
Fraser, T. (Hamilton) Mellish, R. J. Stubbs, A. E.
Freeman, Maj. J. (Watford) Middleton, Mrs. L. Summerskill, Dr. Edith
Freeman, Peter (Newport) Mikardo, Ian
Gaitskell, H. T. N. Millington, Wing-Comdr. E. R Swingler, S.
Gallacher, W. Mitchison, G. R. Sylvester, G. O.
Ganley, Mrs C. S. Monslow, W. Symonds, A. L.
George, Lady M. Lloyd (Anglesey) Montague, F. Taylor, H. B. (Mansfield)
Gibbins, J. Moody, A. S. Taylor, R. J. (Morpeth)
Gibson, C. W. Morgan, Dr. H. B. Taylor, Dr. S. (Barnet)
Gilzean, A. Morley, R. Thomas, D. E. (Aberdare)
Glanville, J. E. (Consett) Morris, P. (Swansea, W.) Thomas, Ivor (Keighley)
Gordon-Walker, P. C. Morris, Hopkin (Carmarthen) Thomas, I. O (Wrekin)
Greenwood, Rt. Hon. A. (Wakefield) Morrison, Rt. Hon H. (Lewisham, E.) Thomas, George (Cardiff)
Greenwood, A. W. J. (Heywood) Mort, D. L. Thomson, Rt. Hn. G R. (Ed'b'gh, E.)
Grenfell, D. R Moyle, A. Thurtle, Ernest
Grey, C. F. Murray, J. D Timmons, J
Griffiths, D. (Rother Valley) Nally, W. Titterington, M. F
Griffiths, Rt. Hon. J (Llanelly) Naylor, T. E. Tolley, L.
Griffiths, W. D. (Moss Side) Neal, H. (Claycross) Tomlinson, Rt. Hon. G
Guest, Dr. L. Haden Nichol, Mrs. M. E. (Bradford, N.) Ungoed-Thomas, L.
Gunter, R. J. Nicholls, H R. (Stratford) Usborne, Henry
Guy, W. H. Noel-Buxton, Lady Vernon, Maj. W. F.
Hall, W. G. Oldfield, W. H. Viant, S. P.
Hamilton, Lieut.-Col. R. Oliver, G. H. Wadsworth, G.
Hannan, W. (Maryhill) Paget, R. T. Wallace, G. D. (Chislehurst)
Hardy, E. A. Paling, Rt. Hon. Wilfred (Wentworth) Wallace, H. W. (Walthamstow, E.)
Harrison, J Paling, Will T. (Dewsbury) Warbey, W. N.
Hastings, Dr. Somerville Pargiter, G. A. Watson, W. M.
Henderson, Joseph (Ardwick) Parkin, B. T. Webb, M. (Bradford, C.)
Herbison, Miss M. Paton, J (Norwich) Weitzman, D.
Hewitson, Capt. M Pearson, A. Wells, P. L. (Faversham)
Hicks, G. Platts-Mills, J. F. F. Wells, W. T. (Walsall)
Holman, P Poole, Major Cecil (Lichfield) West, D. G.
Holmes, H. E. (Hemsworth) Popplewell, E. White, H. (Derbyshire, N. E.)
House, G. Porter, E. (Warrington) Whiteley, Rt. Hon. W.
Hoy, J Porter, G. (Leeds) Wigg, Col. G. E.
Hudson, J H. (Ealing, W.) Price, M. Philips Willey, F. T. (Sunderland)
[...] H. D. (W'lverh'pton, W.) Proctor, W. T. Williams, D. J. (Neath)
Irving, W. J. Pryde, D. J. Williams, J. L. (Keivingrove)
Isaacs, Rt. Hon. G. A. Pursey, Cmdr. H. Williams, W. R. (Heston)
Janner, B. Randall, H. E. Williamson, T.
Jay, D. P. T. Ranger, J. Willis, E.
Jeger, G. (Winchester) Rankin, J. Wills, Mrs. E. A
Jeger, Dr. S. W. (St. Pancras, S. E.) Rees-Williams, D. R. Wilson, J. H.
John, W. Reeves, J. Woods, G. S.
Jones, D. T. (Hartlepools) Reid, T. (Swindon) Wyatt, W.
Jones, Elwyn (Plaistow) Richards, R Yates, V. F.
Jones, P. Asterley (Hitchin) Robens, A. Young, Sir R. (Newton)
Keenan, W. Roberts, Emrys (Merioneth)
Kinghorn, Sqn.-Ldr. E. Roberts, W (Cumberland, N.) TELLERS FOR THE AYES:
Mr. Collindridge and Mr. Daines
Amory, D Heathcoat Boothby, R Bullock, Capt. M.
Assheton, Rt. Hon. R Bower, N. Challen, C.
Baldwin, A. E. Boyd-Carpenter, J. A. Clarke, Col. R. S.
Bennett, Sir P. Bracken, Rt. Hon. Brendan Clifton-Brown, Lt.-Col. G.
Birch, Nigel Braithwaite, Lt.-Comdr. J. G Crookshank, Capt. Rt. Hon H. F. C
Boles, Lt.-Col. D. C. (Wells) Buchan-Hepburn, P. G. T. Crosthwaite-Eyre, Col O. E
Cuthbert, W. N Langford-Holt, J. Reid, Rt. Hon. J. S. C. (Hillhead)
Digby, S. W. Linstead, H. N. Ropner, Col. L.
Donner, Sqn.-Ldr [...] W. Lucas-Tooth, Sir H. Sanderson, Sir F
Drewe, C. Lyttelton, Rt. Hon. O Scott, Lord W.
Dugdale, Maj. Sir T (Richmond) McCallum, Maj. D. Shephard, S. (Newark)
Duthie, W. S. Mackeson, Brig. H. R. Shepherd, W. S. (Bucklow)
Eccles, D. M. McKie, J. H. (Galloway) Smiles, Lt.-Col. Sir W.
Eden, Rt. Hon. A. Maclay, Hon. J. S. Smith, E. P (Ashford)
Fraser, H. C. P. (Stone) Macmillan, Rt. Hon. Harold (Bromley) Smithers, Sir W.
Gage, C. Macpherson, Maj. N. (Dumfries) Snadden, W. M.
Galbraith, Cmdr. T. D. Maitland, Comdr. J. W. Spearman, A. C. M.
Gammans, L D. Manningham-Buller, R. E. Spence, H. R.
Glyn, Sir R. Marples, A. E. Stanley, Rt. Hon. O.
Gomme-Duncan, Col. A Marshall, D. (Bodmin) Stuart, Rt. Hon. J. (Moray)
Grant, Lady Mellor, Sir J. Sutcliffe, H.
Gridley, Sir A. Molson, A. H. E. Taylor, Vice-Adm. E. A. (P'dd't'n, S.)
Hannon, Sir P. (Moseley) Morrison, Rt. Hon. W. S. (Cirencester) Thorp, Lt.-Col. R A. F.
Hare, Hon. J. H. (Woodbridge) Neven-Spence, Sir B. Touche, G. C.
Haughton, S. G. O'Neill, Rt. Hon. Sir H Vane, W. M. F.
Headlam, Lieut.-Col. Rt. Hon. Sir C. Osborne, C. Walker-Smith, D.
Henderson, John (Cathcart) Peake, Rt. Hon. O. Webbe, Sir H. (Abbey)
Hinchingbrooke, Viscount Pitman, I. J. Wheatley, Colonel M. J.
Hogg, Hon. Q. Ponsonby, Col. C. E. White, J. B. (Canterbury)
Hope, Lord J. Poole, O. B. S. (Oswestry) Willoughby de Eresby, Lord
Hudson, Rt. Hon. R. S. (Southport) Prescott, Stanley Winterton, Rt. Hon. Earl
Hutchison, Lt.-Cm. Clark (E'b'rgh W.) Price-White, Lt.-Col. D York, C.
Jarvis, Sir J. Prior-Palmer, Brig. O
Joynson-Hicks, Hon. L. W. Raikes, H. V. TELLERS FOR THE NOES:
Lambert, Hon. G. Ramsay, Maj. S. Mr. Studholme and
Lancaster, Col. C G. Reed, Sir S. (Aylesbury) Major Conant.
Division No. 246] AYES. [8.12 p.m.
Amory, D. Heathcoat Harvey, Air-Comdre. A. V Prescott, Stanley
Assheton, Rt. Hon. R Haughton, S. G. Price-White, Lt.-Col O
Baldwin, A. E. Headlam, Lieut.-Col. Rt. Hon Sir C Raikes, H. V.
Bennett, Sir P. Henderson, John (Cathcart) Ramsay, Maj. S.
Boothby, R. Hinchingbrooke, Viscount Reed, Sir S. (Aylesbury)
Bower, N. Hogg, Hon. Q. Reid, Rt. Hon. J. S. C. (Hillhead)
Boyd-Carpenter, J. A. Hope, Lord J. Renton, D.
Braithwaite, Lt.-Comdr. J. G Hutchison, Lt.-Cm. Clark (E'b'rgh W.) Roberts, Emrys (Merioneth)
Buchan-Hepburn, P. G. T. Jarvis, Sir J. Roberts, W (Cumberland, N.)
Bullock, Capt. M. Joynson-Hicks, Hon. L. W. Sanderson, Sir F.
Byers, Frank Kingsmill, Lt.-Col. W. H. Shephard, S. (Newark)
Challen, C. Lancaster, Col. C. G. Shepherd, W. S. (Bucklow)
Clarke, Col. R. S. Langford-Holt, J. Smiles, Lt.-Col. Sir W.
Clifton-Brown, Lt.-Col. G. Lindsay, M. (Solihull) Smith, E. P (Ashford)
Conant, Maj. R. J. E. Linstead, H. N. Smithers, Sir W.
Crookshank, Capt. Rt. Hon. H. F. C. Low, Brig. A. R. W. Snadden, W. M.
Crosthwaite-Eyre, Col. O. E Lucas, Major Sir J. Spearman, A. C. M
Cuthbert, W. N. Lucas-Tooth, Sir H. Spence, H. R.
Digby, S. W. McCallum, Maj. D. Stanley, Rt. Hon. O.
Donner, Sqn.-Ldr P W. Mackeson, Brig. H. R. Stuart, Rt. Hon. J. (Moray)
Drewe, C. Maclay, Hon. J. S. Sutcliffe, H.
Dugdale, Maj. Sir T. (Richmond) Maemitlan, Rt. Hon. Harold (Bromley) Taylor, Vioe-Adm. E. A. (P'dd't'n, S.)
Eccles, D. M, Macpherson, N. (Dumfries) Thornton-Kemsley, C. N.
Elliot, Rt. Hon. Walter Maitland, Comdr. J. W. Touche, G. C.
Fraser, H. C. P. (Stone) Manningham-Buller, R. E. Vane, W. M. F.
Gage, C. Marples, A. E. Wadsworth, G.
Galbraith, Cmdr. T. D. Marshall, D. (Bodmin) Walker-Smith, D.
Gammans, L. D. Mellor, Sir J. Webbe, Sir H. (Abbey)
George, Lady M Lloyd (Anglesey) Morris, Hopkin (Carmarthen) Wheatley, Colonel M. J.
Glyn, Sir R. Morrison, Maj, J. G. (Salisbury) White, Sir D. (Fareham)
Gomme-Duncan, Col. A. Morrison, Rt. Hon. W. S- (Cirencester) White, J. B. (Canterbury)
Grant, Lady Neven-Spence, Sir B. Willoughby de Eresby Lord
Gridley, Sir A. Osborne, C. Winterton, Rt. Hon Earl
Grimston, R. V. Peake, Rt. Hon. O.
Hannon, Sir P. (Moseley) Pitman, I. J. TELLERS FOR THE AYES:
Hare, Hon. J. H. (Woodbridge) Poole, O. B. S. (Oswestry) Mr. Studholme and
Lieut.-Colonel Thorp.
Adams, Richard (Balham) Cocks, F. S. Gordon-Walker, P. C.
Alexander, Rt. Hon. A. V. Coldrick, W Greenwood, A. W. J (Heywood)
Allen, A. C. (Bosworth) Collins, V. J. Grenfell, D. R.
Alpass, J. H. Colman, Miss G. M Grey, C. F.
Anderson, F. (Whitehaven) Corlett, Dr. J. Griffiths, D. (Rother Valley)
Attewell, H. C. Corvedale, Viscount Griffiths, Rt. Hon. J. (Llanelly)
Ayles, W. H. Cove, W. G. Griffiths, W. D. (Moss Side)
Ayrton Gould, Mrs B Crawley, A Guest, Dr. L. Haden
Bacon, Miss A. Daggar, G. Gunter, R. J.
Baird J. Dalton, Rt. Hon. H. Guy, W. H.
Balfour, A. Davies, Edward (Burslem) Hall, W. G.
Barslow, P. G Davies, Ernest (Enfield) Hamilton, Lieut.-Col. R
Barton, C. Davies, Harold (Leek) Hannan, W. (Maryhill)
Battley, J. R. Davies, Hadyn (St. Pancras, S.W.) Harrison, J.
Beattie, J. (Belfast, W.) Davies, R. J. (Westhoughton) Hastings, Dr. Somerville
Bechervaise, A. E. Deer, G. Henderson, Joseph (Ardwick)
Benson, G. Delargy, H. J. Herbison, Miss M.
Berry, H. Diamond, J. Hewitson, Capt. M
Beswiok, F. Donovan, T. Hicks, G.
Bing, G. H. C. Driberg, T. E. N. Hobson, C. R.
Binns, J. Dugdale, J. (W. Bromwich) Holman, P
Blenkinsop, A. Dumpleton, C. W. Holmes, H. E. (Hemsworth)
Blyton, W. R. Durbin, E. F. M. House, G.
Boardman, H. Ede, Rt. Hon. J. C. Hoy, J.
Bottomley, A. G. Edwards, Rt. Hon. Sir C. (Bedwelley) Hudson, J. H. (Ealing, W.)
Bowden, Flg.-Offr. H. W. Edwards, N. (Caerphilly) Hughes, H. D. (W'lverh'pton, W.)
Bowles, F. G. (Nuneaton) Edwards, W. J. (Whitechapel) Irving, W. J.
Braddock, Mrs. E. M (L'pl, Exeh'ge) Evans, S. N. (Wednesbury) Isaacs, Rt. Hon. G. A.
Braddock, T. (Mitcham) Ewart, R. Janner, B.
Brook, D. (Halifax) Fairhurst, F. Jay, D. P. T.
Brooks, T. J. (Rothwell) Fernyhough, E Jeger, G. (Winchester)
Brown, George (Belper) Follick, M. John, W.
Brown, T. J. (Ince) Foot, M. M. Jones, Rt. Hon. A. C. (Shipley)
Bruce, Maj. D W T. Forman, J. C. Jones, D. T. (Hartlepools)
Buchanan, G. Fraser, T. (Hamilton) Jones, Elwyn (Plaistow)
Burke, W. A. Freeman, Maj. J. (Watford) Jones, P. Asterley (Hitchin)
Butler, H. W. (Hackney, S.) Freeman, Peter (Newport) Keenan, W.
Callaghan, James Gaitskell, H. T. N. Kinghorn, Sqn.-Ldr. E
Carmichael, James Gallacher, W Kinley, J.
Castle, Mrs. B. A. Ganley, Mrs C. S Kirkwood, D.
Champion, A. J. Gibbins, J. Lang, G.
Chater, D. Gibson, C. W. Lee, F. (Hulme)
Chetwynd, G. R. Gilzean, A. Lee, Miss J. (Cannock)
Cobb, F. A. Glanville, J E (Consett) Leslie, J. R.
Levy, B. W. Paton, J. (Norwich) Symonds, A. L.
Lewis, A. W. J. (Upton) Pearson, A. Taylor, H. B. (Mansfield)
Lewis, J. (Bolton) Poole, Major Cecil (Lichfield) Taylor, R. J. (Morpeth)
Lipton, Lt.-Col. M Popplewell, E. Taylor, Dr. S. (Barnet)
Logan, D. G. Porter, E. (Warrington) Thomas, D. E. (Aberdare)
Longden, F. Porter, G. (Leeds) Thomas, Ivor (Keighley)
Lyne, A. W. Prise, M. Philips Thomas, I. O. (Wrekin)
McAdam, W. Proctor, W. T. Thomas, George (Cardiff)
McEntee, V La T. Pryde, D. J. Thurtle, Ernest
MeGhee, H. G. Pursey, Cmdr. H. Timmons,
Mack, J D. Randall, H. E. Titterington, M. F
McKay, J. (Wallsend) Ranger, J. Tolley, L.
McKinlay, A. S. Rankin, J. Tomlinson, Rt. Hon. G.
Maclean, N. (Govan) Rees-Williams, D. R. Ungoed-Thomas, L.
McLeavy, F. Reeves, J. Usborne, Henry
Manning, C. (Camberwell, N.) Reid, T. (Swindon) Vernon, Maj. W. F
Manning, Mrs. L. (Epping) Richards, R. Viant, S. P.
Marshall, F. (Brightside) Robens, A. Walkden, E.
Mayhew, C. P. Robertson, J. J. (Berwick) Wallace, G. D. (Chislehurst)
Medland, H. M. Rogers, G. H. R. Wallace, H. W. (Walthamstow, E.)
Hellish, R. J. Ross, William (Kilmarnock) Warbey, W. N.
Middleton, Mrs. L, Royle, C Watson, W. M.
Mikardo, Ian Sargood, R. Weitzman, D.
Millington, Wing-Comdr. E. R Scott-Elliot, W. Wells, P. L. (Faversham)
Mitchison, G. R. Segal, Dr. S. Wells, W. T. (Walsall)
Monslow, W. Sharp, Granville West, D. G.
Moody, A. S. Shawcross, C. N. (Widnes) Westwood, Rt. Hon. J.
Morley, R. Shurmer, P White, H. (Derbyshire, N. E.)
Morris, P. (Swansea, W.) Silverman, S S. (Nelson) Whiteley, Rt. Hon. W.
Mort, D. L. Simmons, C. J. Wigg, Col. G. E.
Moyle, A. Skeffington-Lodge, T. C. Willey, F. T. (Sunderland)
Murray, J. D Skinnard, F. W. Williams, D. J. (Neath)
Nally, W. Smith, C (Colchester) Williams, J. L. (Kelvingrove)
Naylor, T. E. Smith, H. N. (Nottingham, S.) Williams, W. R. (Heston)
Weal, H. (Claycross) Snow, Capt. J. W. Williamson, T.
Nichol, Mrs. M. E. (Bradford, N.) Sorensen, R. W Willis, E.
Nicholls, H. R. (Stratford) Soskice, Maj. Sir F Wills, Mrs. E. A.
Noel-Buxton, Lady Stamford, W. Wilson, J. H.
Oldfield, W. H. Steele, T. Woods, G. S.
Oliver, G. H. Stewart, Michael (Fulham, E.) Wyatt, W.
Paget, R. T. Stross, Dr. B. Yates, V. F.
Paling, Rt. Hon. Wilfred (Wentworth) Stubbs, A. E. Young, Sir R. (Newton)
Paling, Will T. (Dewsbury) Summerskill, Dr. Edith
Pargiter, G. A. Swingler, S. TELLERS FOR THE NOES:
Parkin, B T. Sylvester, G. O Mr. Collindridge and Mr. Daines.

Motion made, and Question proposed, "That the Clause stand part of the Bill."

Mr. Eccles

I should like to ask one question about this Clause. I am not clear how a company will know whether a dividend paid to it is franked investment income or not. There must be some means by which the recipient is able to tell whether the income is franked, and free from complication. I think it will be very difficult in certain cases. If the learned Solicitor-General will look at the case which will arise under Clause 26 (1, b), he will see that there might well be a British company which has shares in an American company; the American company, in turn, will derive some of its income from other British companies; the American company pays a dividend, which is paid to the British company; but since part of that dividend has been earned by British companies, whose income has already borne the tax, part of the dividend paid by the American company to the British company will be franked, and part will not be franked.

How is the parent company in London to know whether, when it gets a dividend, it is to be franked or not? I suggest to the learned Solicitor-General that he had better have the word "franked," or something of that sort, put upon the share warrant. The share warrant is already overloaded with various bits of information about double taxation, and things of that sort, but we shall have to have something else. I wonder whether he has thought of that, and whether we ought to have some sort of recognised procedure in this matter?

The Solicitor-General

Ordinarily, as a matter of practice, there should be no difficulty. In the case which falls within paragraph (a), we can know almost certainly that the income obtained from another company will ordinarily have been franked income; it will be income which will have borne Profits Tax. I quite agree, there may be cases under paragraph (b) where it may not be so easy to tell; that is to say, there may be cases of franked income coming directly to the company which it is sought to tax, whereas it will not be altogether easy to differentiate between the two. After all, when the Crown seeks to impose a tax it is for the Crown to show that the particular item of money upon which it seeks to levy the tax is within the scope of the charge. I agree with the hon. Member, that there may be cases in which it may not be altogether easy to tell, but it should be possible to deal with it administratively without very much difficulty by a certain amount of commonsense being applied to a particular case.

Question put, and agreed to.

Clause ordered to stand part of the Bill.

Clause 28 ordered to stand part of the Bill.